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I Missed Recertifying My Lower Student Loan Payment and My Interest Was Added to the Balance

Written by Steve Rhode


Dear Steve,

I wonder if you can help. I’ve had my Nelnet loans on auto-pay for a couple of years. 2 months ago I received notice to re-certify for the income based repayment plan, but I did not see the emails (went to my junk folder). This month I was kicked off the plan, my interest was capitalized, and my monthly payment amount tripled. When I noticed the amount taken out of my bank account, I called Nelnet and was told there is nothing I can do except reapply.

Is there any way to have the interest “uncapitalized”?



Dear Krystal,

The income driven repayment plans are not always the magic solution people think they are. One of the downsides happens when you missed your annual certification deadlines and have all the building interest added on to the loan balance. This is call recapitalization.

If you no longer show you have a need for a Partial Financial Hardship then the recapitalization occurs.

To make the issue even more confusing, the different income driven repayment options handle interest recapitalization differently. The IBR can result in all the delayed interest being added to the balance when you fail to recertify. REPAYE and PAYE handle it differently since REPAY provides coverage of 50% of the additional interest and PAYE limits the total interest that can be recapitalized.

You can reapply to an income driven repayment plan but keep in mind it is your total responsibility to not miss your annual recertification date. I’d add a bunch of calendar reminders for yourself and not count on the servicer to remind you.

To recertify you must submit a new income driven repayment plan application.

After missing the deadline to recertify I don’t know of any process to remove the recapitalized interest unless the servicer made an error after you submitted a timely and complete new application to recertify with.

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About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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